Comcast Earnings Show that NBC Broadcast is Hurting for Growth

While subscriber additions across broadband, pay-TV and digital phone services were the primary focus of Comcast’s (NASDAQ:CMCSA) recently reported Q3 2011 earnings, its NBCUniversal division performed well and deserves a second look. While growth in its cable networks looked solid, the NBCUniversal’s broadcasting division posted flat growth in its ad revenues and was noticeable weak. It appear that NBCUnversal’s broadcasting is lagging behind other big broadcasting networks like CBS (NYSE:CBS), Disney’s (NYSE:DIS) ABC and News Corp’s (NASDAQ:NWS) Fox broadcasting.

The strength in earnings was driven primarily by an increase in revenues from cable networks, which form majority of the profits for NBCUniversal. The growth in cable networks came equally from an increase in subscription revenues and advertising revenues, both growing by roughly 10%. ^[1] This makes one thing clear – the advertising market is still doing well despite the economic headwinds as we previously predicted. See our earnings preview note titled Comcast Earnings Preview: What We’re Watching Wednesday.

We note that NBCUniversal constitutes only 16% to Comcast’s stock and within this, the broadcasting revenues have a small value share due to low margins. So while better ratings could help NBC gain more advertising revenues and improve its outlook, it won’t move the stock much for Comcast.

Our price estimate for Comcast stands at $26.60, implying a premium of a little over 5% to the market price.

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1. Comcast’s Q3 2011 Earnings Transcript [↩]